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Issues Concerning the Use of MTBE in Reformulated Gasoline: An Update.
Subcommittee on Oversight and Investigations
Mr. Michael Ports
Good morning, Mr. Chairman. My name is Mike Ports. I am President of Ports Petroleum Company, an independent motor fuels marketer headquartered in Wooster, Ohio. Ports Petroleum owns and operates 65 high volume retail motor fuels outlets in 12 states from Ohio to Nebraska, south to Mississippi, and east to Georgia. Thank you for inviting me to testify today on issues relating to MTBE as an additive in federal reformulated gasoline ("RFG"). I am representing the National Association of Convenience Stores ("NACS") and the Society of Independent Gasoline Marketers of America ("SIGMA"). NACS is a national trade association of more than 2,300 companies that operate over 104,000 convenience stores nationwide and employ 1.4 million individuals. Over 75 percent of NACS' member companies sell motor fuels and the convenience store industry sold more than 115 billion gallons in 2000. SIGMA is an association of approximately 260 motor fuels marketers operating in all 50 states. SIGMA members supply over 28,000 motor fuel outlets and sell over 48 billion gallons of gasoline and diesel fuel annually -- or approximately 30 percent of all motor fuels sold in the nation last year. This hearing has been titled as "An Update" on issues relating to MTBE in federal RFG. In reality, at least from an independent marketer's point of view, very little has changed since NACS and SIGMA last testified before this Committee on this issue in 1999. Two key developments have occurred over the past two years. First, the Environmental Protection Agency ("EPA") has denied California's petition to opt-out of the federal RFG oxygenate mandate. This denial has set up a potential gasoline supply crisis for California marketers and consumers if the state's MTBE ban takes effect on schedule on January 1, 2003. California has sued EPA over its waiver decision, and there are reports that California is considering a delay in its 2003 MTBE ban to avoid a gasoline supply crisis. Second, at least one lower federal court has upheld a state's power to ban the use of MTBE in gasoline sold in a state. This legal question remains unsettled. However, from an independent marketer's perspective, the decision simply exacerbates the continued "balkanization" of the nation's gasoline markets. If MTBE, or any fuel component, can be banned on a state-by-state basis, then the problem of "boutique" fuels will only become worse. Perhaps more important than what has changed since 1999 is what has not changed. In fact, much has remained the same. First, Congress still has not repealed the federal RFG oxygenate mandate. The oxygenate mandate still exists, despite the fact that refiners do not need oxygenates to manufacture and supply clean-burning gasoline and despite the fact that there is no environmental protection rationale for the oxygenate mandate. Second, the federal oxygenate mandate continues to cause states to create additional boutique formulations of gasoline, either to avoid the use of MTBE or to promote the use of ethanol. These boutique fuels continue to stress the nation's gasoline refining and distribution systems. Boutique fuels continue to be a primary cause of the substantial gasoline supply dislocations that occur whenever a refinery goes off-line or a pipeline breaks. Further, these fuels are, at least in part, responsible for the severe wholesale and retail gasoline price volatility that often accompanies these dislocations. Third, California, and other states, still face a supply crisis if MTBE is banned from use as a gasoline additive. Ultimately, it will be consumers who will pay at the gasoline pump if these supply crises occur. Fourth, manufacturers of MTBE and ethanol and their supporters are still at a legislative stalemate. Neither side of this debate has been able to muster the political support -- and votes -- necessary to either ban the use of MTBE or mandate the use of ethanol. This situation is not likely to change in the near future as many legislators are reluctant to touch the so-called "third rail" of fuels policy. Fifth, EPA and the states still have not effectively enforced the 1998 underground storage tank ("UST") upgrade mandate -- a mandate that, if properly administered and enforced, would prevent many of the MTBE releases that cause groundwater contamination. I will comment more on this subject in just a minute. Lastly, the positions of NACS and SIGMA on these public policy issues have not changed since 1999. We continue to support the repeal of the oxygenate mandate so that refiners and marketers can meet emissions standards without the use of MTBE or ethanol. We continue to support proposals to permit states to opt-out of the oxygenate mandate. And, we continue to support a reduction in the number of boutique fuel formulations across the nation -- a reduction that will lead to increased gasoline supply, increased gasoline fungibility, and decreased gasoline price volatility. We also continue to support even-handed and effective enforcement of the 1998 UST upgrade mandate. I would like to spend a couple of minutes on this subject -- mainly because it is a subject that Congress can address today, without delving into the other delicate and politically volatile issues relating to fuels regulation, such as an MTBE ban or the oxygenate mandate. NACS and SIGMA have long been vocal advocates of UST enforcement. Our motivation is simple: since 1988, our members have spent hundreds of millions of dollars complying with the UST standards. Further, many of our members, including so-called "mom-and-pops," have closed retail outlets as a means of compliance. Late last year, Senators Robert Smith and Lincoln Chafee asked the General Accounting Office ("GAO") to conduct an evaluation of the federal UST program. GAO's report, "Improved Inspections and Enforcement Would Better Ensure the Safety of Underground Storage Tanks," was released on May 4, 2001. We heard from GAO on a previous panel. NACS and SIGMA agree with GAO's conclusions in the report about the lack of consistent federal and state enforcement of the UST requirements. GAO estimated that, nearly three years after the 1998 deadline, only 89 percent of regulated tanks have come into voluntary compliance. GAO identified state and local agencies and very small businesses as the primary owners and operators of tanks that remain in non-compliance. While it is true that EPA provided many of these UST owners with a six-month extension of the 1998 deadline, it is now late 2001 and EPA has shown no indication of a willingness to enforce the UST requirements against these and other non-complying tanks. Moreover, because EPA is not pressing UST enforcement, states also generally have ignored these non-complying tanks. There is no justification for EPA or the states to distinguish between private and publicly-owned tanks. A leak from the UST of the local fire or highway department causes the same environmental harm as a leak from a private UST. In its report, GAO recommended steps that Congress could take to provide additional UST resources to EPA and the states. NACS and SIGMA have supported, and continue to support, such measures. This Committee, and the House of Representatives, twice previously has passed legislation that would have expanded the allowable uses by the states of the Leaking Underground Storage Tank ("LUST") Trust Fund monies. This Committee should take up this legislation again as soon as possible. NACS and SIGMA -- along with the Petroleum Marketers Association of America, the National Association of Truck Stop Operators, and the Oxygenated Fuels Association -- support UST amendments that address most of GAO's recommendations. Legislation to enact these recommendations should at the least include the following four components:
NACS and SIGMA urge this Committee, and this Congress, to consider and expeditiously pass this type of legislation. Such legislation can and should move independently of legislation addressing the oxygenate mandate or MTBE. An important consideration for this Committee is that this stand-alone UST legislation can be passed in the near future, will assist EPA and the states to enforce the 1998 deadline, and will stop additional leaks of gasoline and its components from USTs. * * * Thank you for the opportunity to present NACS' and SIGMA's views. I would be happy to answer any questions raised by my testimony.
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